Retailers Expect Love on a Budget This Valentine's Day

Even Cupid is frugal these days. Among some mildly optimistic retail forecasts for 2010, experts expect lovers will hold their wallets tight while shopping for Valentine's Day gifts. Only 12% of shoppers plan to spend more for this year's holiday, according to a survey of 1,200 adults from website eBillme.com. And 47% still don't know what they're going to buy their Valentines in 2010.Another poll, just released by the the National Retail Federation (NRF), found consumers will spend -- but cautiously -- on this next big shopping event, when Americans are expected to spend $14.1 billion. Valentine's Day shoppers plan to spend $103 on gifts on average, up only 50 cents from last year's level. But the survey found they'll add spending only for the smallest items on their gift list.

Consumers plan to spend less on their significant others $63.34 compared to $67.22 last year), while holding spending on family members steady ($20.94 vs. $20.95). They'll spend a little more on friends ($5.37 vs. $4.74), co-workers ($2.84 vs. $1.94) and even pets ($3.27 vs. $2.17)

And while the standbys of flowers, candy and cards are still popular, the gifts are falling on the practical side this year. Fewer people will splurge on an evening out: 35.6%, compared to 47% last year. And while 15.5% will still give jewelry, that's a little lower than last year's 16%. And more people will give clothing to their Valentine, 14.4% compared to 10.2% in 2009.
Still Making Up Lost Ground

Despite having outspent most forecasts for this past holiday season, U.S. consumers are still holding back, according to most experts, who are beginning to parse their expectations for this year. The early consensus is that sales will rise very modestly, perhaps to make up some of the ground lost in 2008, but they won't show much growth above the levels seen in 2007.

The NRF is forecasting 2010 retail sales -- excluding autos, gas and restaurants -- will rise 2.5% above last year, which was down 2.5% from 2008. Rosalind Wells, the NRF's chief economist, says it may be 2011 before retail spending regains the ground lost to the recession.

Household wealth has begun to recover, but shoppers continue to seek value, says Wells. She notes discounters are still the favored destination of the average shopper, and retailers catering to the middle class are suffering. It's going to be a slow climb back for consumers, who plan to keep clipping coupons for a while, say the experts. Focusing on Necessities

"The customer has learned a lot as a result of this recession," says Lois Huff, senior vice president at consultancy RetailForward. Many budget-friendly shopping strategies adopted during the downturn will stick around after the recovery, she says. RetailForward is forecasting retail sales will rise 1.5% to 2% in the first half of 2010 and then grow faster, 3% to 4% in the second half, as the job market recovers and household incomes start to grow.

Food and drug sales will lead, with 2.5% growth, as shoppers keep focusing on necessities. But some discretionary sectors will grow, including apparel, according to RetailForward's forecast. And as the housing market begins to rebound, home-goods sales will turn from a small negative to flat growth in the first half, and expand by 1.5% to 2% in the second half.

"People who still have jobs have been holding back for fear of becoming one of the employed," says Wells. "When the job markets begin to improve, they will start to feel better, to loosen up their spending patterns."

Shoppers Could Still Surprise

Wells says consumers hadn't completely spent themselves out during the holiday season. The NRF had forecast holiday spending would be down 1% below 2008's levels, but sales were up 1.9% instead.

Still, shoppers will make room for Valentine's Day gifts, says Wells. The gifts don't have to be big-ticket items, she adds. "These special events are always attractive to consumers," she says. Retailers can only hope that Cupid can loosen some purse strings as well as heart strings.